Copper Declines as Global Inventories Climb to Seven-Month High

By Glenys Sim

Sept. 1 (Bloomberg) -- Copper fell as global inventories of the metal used in wires and pipes reached the highest in almost seven months, increasing concern a spreading global economic slowdown will reduce demand.

Copper slid 6.8 percent in August as stockpiles monitored by the London Metal Exchange jumped 22 percent to 173,375 metric tons, the most since February 5.

``Copper prices in the near term will look to crude oil and the U.S. dollar for direction, with a slight downside bias as stockpiles continue to rise,'' Zeng Chao, chief metals analyst at Everbright Futures Co., said in a report.

Copper for delivery in three months dropped 0.3 percent to $7,490 a ton on the London Metal Exchange at 12:37 p.m. Singapore time. Metal for November delivery fell 0.2 percent to 58,540 ($8,565) a ton on the Shanghai Futures Exchange.

Manufacturing in China, the world's fastest-growing major economy, contracted for a second straight month in August, according to a survey of purchasing managers.

The Purchasing Managers' Index was a seasonally adjusted 48.4, unchanged from July, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading above 50 reflects an expansion, below 50 a contraction.

A 5.7-magnitude earthquake in China killed more than two dozen people in the same southwestern province that was struck less than four months ago by the nation's deadliest temblor in 32 years. Chinese aluminum and zinc companies in Sichuan province shut plants after the May 12 earthquake damaged infrastructure and cut power supplies.

China Quake

``We've not heard any news of damaged zinc and aluminum plants or stopped production this time,'' said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co. ``The damage wasn't much the last time so unless reports surface to say otherwise, I don't think this will affect prices much.''

Panzhihua New Steel & Vanadium Co., southwestern China's biggest steelmaker, said its main plant was affected by earthquakes during the weekend.

Other factories and mines of Panzhihua Iron & Steel Group, the parent, also had damage, Panzhihua New Steel said today in a statement to the Shenzhen stock exchange, without giving details.

Zinc on the LME traded little changed at $1,810 a ton, and Shanghai zinc for November delivery rose 1.1 percent to 14,415 yuan a ton at the 11:30 a.m. local time break. LME aluminum gained 0.3 percent to $2,723 a ton, and November-delivery in Shanghai ended little changed at 17,705 yuan a ton, shrugging off the possibility that the quake in China's Sichuan province could halt production in the region.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net